Sent by Jonathan Stark on March 6th, 2017
From time to time I get questions about whether value pricing works with agile projects.
The answer is:
Yes. It works fine.
There’s no inherent conflict between value pricing and agile (or any other type of project management).
However, if a prospect presses you on this, the conversation will probably go something like this...
“Thanks for the proposal, but we really need hourly because we do agile.”
“Gotcha. Well, whether we use agile, scrum, or waterfall, how we manage the project won’t change the overall project goals. I want our financial incentives to be aligned which is impossible with hourly. By using a fixed price, we both have a powerful financial incentive to reach the project goals as quickly and efficiently as possible. And yes, I agree with you that agile is the best approach in this case.”
“But how much of your time with we get?”
“It’s hard to say at this point. Some weeks will be busier than others. But because I quoted a fixed price, I’m strongly incentivized to get things done as quickly and efficiently as possible.”
“Well, we need to know how long the project will take.”
“Totally understandable. Based on my past experience with projects like to this, it will take at least [NUMBER OF MONTHS]. But that’s assuming that there are no surprises, which we both know is impossible (:grins:). Here’s what I normally do: I’ll draft a timeline and will update it weekly for our status meetings. This will give you (and management) a better and better sense of a likely delivery date as we progress. Will that be sufficient?”
Have you had similar conversations when trying to price agile projects? Please hit reply and let me know how it went for you :)
P.S. Did you find this script useful? If so, you’ll LOVE the “Learn Your Lines” guidebook that is included in the Complete Bundle of my book Hourly Billing Is Nuts. You can read more about LYL here -> http://hourlybillingisnuts.com